LAFAYETTE -- Threatened legal action over a highly disputed large-scale apartment project is prompting the city council to mull a future lawsuit -- and possibly to consider an alternate project.

City Manager Steve Falk will present to the city leaders on Monday an option to settle "potential" litigation the property owner and developer of the Terraces of Lafayette have threatened should the project be denied, according to the city.

Officials in September signed an agreement with the property owners and developer The O'Brien Land Co. that effectively suspended a lawsuit filed against the city earlier this year until Feb. 12, or 30 days after any party withdraws. That legal claim asserted the city had delayed the certification of the project's environmental impact report. The project applicants also dispute 13 "unavoidable, significant impacts" the city says would result from the project. The city council certified that impact report Aug. 12.

In addition to his presentation, Falk said he will ask the council hold public meetings Jan. 13 and Jan. 22 to consider a potential new agreement between the city and the Terraces' applicants.

Falk would not comment on the specifics of the settlement proposal. But he said city officials don't want to discuss the Terraces litigation behind closed doors. State law allows the council to meet in closed session with the city attorney to discuss pending litigation.

"Given the high level of public interest in this project, the city would prefer to make this process as transparent as possible," Falk said in an e-mail.

Officials could also consider looking at a project alternative developers presented to design review commissioners that reduces the number of proposed units from 315 to 208. Developers are hoping to construct the apartments in 14 separate buildings on a 22-acre privately-owned property at Deer Hill and Pleasant Hill Roads.

Last month, design review commissioners rejected plans for the 315-unit development and recommended the planning commission deny the project. Developers The O'Brien Land Co. have since requested the planning commission postpone the analysis until January at the earliest, according to city staffers. The circulation commission is slated to discuss the project Dec. 16.

An attorney representing O'Brien and the landowner did not return a call seeking comment.

If you go
What: Lafayette City Council meeting
When: 7 p.m. Dec. 9
Where: Community Hall, Lafayette Library & Learning Center, 3491 Mt. Diablo Blvd.
Contact: www.lovelafayette.org